Thursday, November 20, 2008

"Now What?": Capital Credit Insurance

Last week Slate magazine published a review of a new book by Matthew Bishop and Michael Green, Philanthrocapitalism: How the Rich Can Save the World.

"The Rise and (Potential) Fall of Philanthrocapitalism: Billionaires brought their business sense and ambition to charitable giving. Now what?" as the review by Georgia Levenson Keohane was somewhat cumbersomely titled, focused on how current economic conditions may effect "philanthrocapitalism," and analyzing the effectiveness of a "'movement' of philanthropists has 'set out to change the world.'"

From the point of the Just Third Way, however, the only thing that "philanthrocapitalism" has done is perpetuate an unjust system. "Philanthrocapitalists" probably have their hearts in the right place, and they have admittedly done a great deal of good in the realm of individual charity. What they have left out of their programs, however, is "social charity," the virtue that adjures us to love our institutions as we love ourselves, just as individual charity has us love our neighbor as ourselves.

Philanthropic programs that keep the current system running are not the answer, regardless how much wealth is applied to the task. What is needed is a fundamental restructuring of the social order, as Pope Pius XI, the head of the Catholic Church at the time, explained in 1931 in his "encyclical," Quadragesimo Anno, "On the Restructuring of the Social Order." The program, reiterating what Pope Leo XIII had said forty years previously in Rerum Novarum ("On the Relations Between Labor and Capital"), 1891: "The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners."

The popes did not mean consumer goods, even such "durables" as houses, cars, and access to consumer credit, although these (within reason) are usually good things. What the popes, in common with most political philosophers throughout history, were talking about is ownership of the means of production. In the modern age in most cases that translates into corporate equity with full rights of ownership vested in the shareholder . . . and that will require a massive and fundamental overhaul of the financial system as well as a return to some basic legal and philosophical principles on which the United States was founded.

One of the greatest barriers to full participation in the economic common good is lack of access to the means of acquiring and possessing private property in the means of production. This is so basic a right that George Mason, the "Father of the Bill of Rights," put it in the first paragraph of his draft of the Virginia Declaration of Rights, a document that served as a model for Jefferson's Declaration of Independence a month later:
That all men are by nature equally free and independent, and have certain inherent rights, of which they cannot, by any compact, deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.
As Louis Kelso pointed out, the "universal collateralization requirement" keeps more people from becoming owners than anything else. That is, you need money to make money, so that membership in the "club" of capital owners is closed to anyone without sufficient existing wealth to put up as collateral for a loan to purchase income-generating assets.

Rather than simply giving away money to support the current system, then, the "philanthrocapitalists" should fund a capital credit reinsurance pool to take the place of the collateral that the poor don't have. In this way they not only retain title to their wealth, they benefit society and individuals far more than simply funding programs that, despite the great amount of goodwill and effort involved, never seem to make any headway against the seemingly overwhelming problems that afflict the world.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).





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